Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 29, 2012

Notes To Financial Statements [Abstract]

Basis of Presentation

A) Basis of Presentation

The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company" or “Middleby”), pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the financial statements and related notes contained in the company's 2011 Form 10-K. The company’s interim results are not necessarily indicative of future full year results for the fiscal year 2012. 

During the third quarter of 2012, the company voluntarily changed the date of its required goodwill and indefinite-lived intangible asset impairment testing from the last day of the fourth quarter to the first day of the fourth quarter. This voluntary change in accounting principle allows the company additional time to complete its annual goodwill and indefinite-lived intangible asset impairment testing in advance of its year-end reporting and results in better alignment with the company's strategic planning and forecasting process. This change did not delay, accelerate or avoid an impairment charge.

Accordingly, the company believes that this accounting change is preferable in its circumstances. This change constitutes a change in accounting principle under Accounting Standards Codification ("ASC") 250 "Accounting Changes and Error Corrections," and had no impact on the company's consolidated balance sheet, statement of operations or cash flows. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require the application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively.

In the opinion of management, the financial statements contain all adjustments necessary to present fairly the financial position of the company as of September 29, 2012 and December 31, 2011, and the results of operations for the three and nine months endedSeptember 29, 2012 and October 1, 2011 and cash flows for the nine months endedSeptember 29, 2012 and October 1, 2011.

Non-Cash Share-Based Compensation

B) Non-Cash Share-Based Compensation

The company estimates the fair value of market-based stock awards and stock options at the time of grant and recognizes compensation cost over the vesting period of the awards and options. Non-cash share-based compensation expense was $3.1 million and $5.5 million for the third quarter periods ended September 29, 2012 and October 1, 2011, respectively. Non-cash share-based compensation expense was $9.0 million and $12.8 million for the nine month periods ended September 29, 2012 and October 1, 2011, respectively

Income Tax Contingencies

C) Income Taxes

The tax provision for the three and nine month periods ended September 29, 2012 reflects favorable reassessment of certain U.S. state tax exposures, lower effective tax rate on increased income in lower tax rate foreign jurisdictions and net tax benefit from certain deductions related to U.S. manufacturing activities.

As of December 31, 2011, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $15.6 million (of which $14.1 million would impact the effective tax rate if recognized) plus approximately $1.9 million of accrued interest and $2.0 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Interest of $0.1 million was recognized in the third quarter of 2012 and 2011, respectively. Penalties of $0.2 million and $0.1 million were recognized in the third quarter of 2012 and 2011, respectively. In the first nine months endedSeptember 29, 2012, the company recognized a benefit of $4.1 million for unrecognized tax benefits related to reduced tax exposures.

It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that approximately $0.1 million of its currently remaining unrecognized tax benefits may be recognized over the next twelve months as a result of lapses of statutes of limitations.

A summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are: 

Fair Value Measures

D) Fair Value Measures

ASC 820 "Fair Value Measurements and Disclosures" defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3 – Unobservable inputs based on our own assumptions.

The company’s financial assets and liabilities that are measured at fair value and are categorized using the fair value hierarchy are as follows (in thousands):

	Fair Value Level 1		Fair Value Level 2		Fair Value Level 3		Total
As of September 29, 2012
Financial Assets:
Pension plans	$	21,966	$	1,538	—		$	23,504
Financial Liabilities:
Interest rate swaps	—		$	3,318	—		$	3,318
Contingent consideration	—		—		$	5,845	$	5,845
As of December 31, 2011
Financial Assets:
Pension plans	$	21,229	$	1,297	—		$	22,526
Financial Liabilities:
Interest rate swaps	—		$	3,216	—		$	3,216
Contingent consideration	—		—		$	3,398	$	3,398